Using the right environmental indicators: Tracking progress, raising awareness and supporting analysis : Nordic perspectives on indicators, statistics and accounts for managing the environment and the pressures from economic activities

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Using the right environmental indicators:

Tracking progress, raising awareness and

supporting analysis

Ved Stranden 18 DK-1061 Copenhagen K www.norden.org

Finding and using indicators that are most suited for tracking progress, raising awareness and supporting analysis is a challenge. Indicators need to be used in appropriate contexts and should ideally be fit-for-purpose. For example, indicators which are best used for awareness-raising cannot be used for monitoring policy goals.

This report presents a short review of different indicators typically encountered by environmental policy makers. General advice is provided regarding their uses. In the second part of the report, an overview of the environmental-economic accounting work of the Nordic statistical institutes is presented. Lessons learned from the development of these accounts as well as ideas for future work are described. These types of environmental accounts provide a framework for developing information about the connections between the economy and the environment. The study was commissioned by the Nordic Council of Ministers and conducted by the national statistical agencies in the Nordic countries, led by Statistics Norway and Statistics Sweden.

Using the right environmental indicators: Tracking

progress, raising awareness and supporting analysis

Tem aNor d 2012:535 TemaNord 2012:535 ISBN 978-92-893-2371-0 http://dx.doi.org/10.6027/TN2011-535 TN2012535 omslag.indd 1 09-07-2012 08:59:43

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Using the right

environmental indicators:

Tracking progress, raising

awareness and supporting

analysis

Nordic perspectives on indicators, statistics and

accounts for managing the environment and the

pressures from economic activities

Julie L. Hass, Statistics Norway and Viveka Palm, Statistics Sweden

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Using the right environmental indicators:

Tracking progress, raising awareness and supporting analysis

Nordic perspectives on indicators, statistics and accounts for managing the environment and the pressures from economic activities

Julie L. Hass, Statistics Norway and Viveka Palm, Statistics Sweden

TemaNord 2012:535 ISBN 978-92-893-2371-0

http://dx.doi.org/10.6027/TN2012-535 © Nordic Council of Ministers 2012 Cover photo: Ojo Images

Print: Kailow Express ApS Copies: 260

Printed in Denmark

This publication has been published with financial support by the Nordic Council of Ministers. However, the contents of this publication do not necessarily reflect the views, policies or recom-mendations of the Nordic Council of Ministers.

www.norden.org/en/publications

Nordic co-operation

Nordic co-operation is one of the world’s most extensive forms of regional collaboration, involv-ing Denmark, Finland, Iceland, Norway, Sweden, and the Faroe Islands, Greenland, and Åland. Nordic co-operation has firm traditions in politics, the economy, and culture. It plays an im-portant role in European and international collaboration, and aims at creating a strong Nordic community in a strong Europe.

Nordic co-operation seeks to safeguard Nordic and regional interests and principles in the global community. Common Nordic values help the region solidify its position as one of the world’s most innovative and competitive.

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Content

Preface... 7

Summary ... 11

Introduction ... 13

1. Major policy initiatives and resultant indicator sets ... 17

2. Different types of indicators often used in relation to the environment ... 21

2.1 Indicator/information types ... 22

2.2 Monitoring Progress or evaluating developments towards goals ... 26

2.3 Ratio Relationships ... 28

2.4 Awareness-raising for the Environment: Environmental composite indices ... 31

2.5 Adjusting the national accounts – flows and assets ... 38

2.6 Awareness-raising about social, economic, environmental topics, sustainable development ... 43

2.7 Analysis ... 46

3. The building stones for environmental policy indicators: Environmental statistics and environmental accounts... 53

3.1 Environmental Statistics ... 54

3.2 Environmental Accounts... 57

3.3 Some lessons learned in Nordic countries from the development of environmental accounts. ... 59

3.4 New areas to be considered for future development ... 63

3.5 How much user involvement can you expect? ... 63

3.6 Data situation concerning environmental accounts in the Nordic countries ... 64

3.7 Data quality and official statistics ... 65

4. Nordic approach: future work ... 67

4.1 European Commission (Eurostat) proposes new modules to be included in the EU legal framework for environmental accounts ... 67

4.2 General recommendations for the statistical institutes – which do not potentially cost much more than the current regulations or are of national interest ... 68

5. Conclusion ... 75

6. References ... 79

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Preface

The challenge of developing appropriate indicators and accounting sys-tems for environmental issues and policy targets, perhaps particularly in relation to national accounting, and for linking and integrating environ-mental policies and economic policy-making, has long been a focus of attention for environmental policy, internationally, in the Nordic coun-tries and in the Nordic Council of Ministers.

In recent years, several major initiatives have been taken interna-tionally, including the report of the Stiglitz-Sen-Fitoussi commission, the European Union’s work on “GDP and beyond”, and the international collaborative work led by the OECD on “Measuring the Progress of Socie-ties”. The United Nations’ handbook on a System of Environmental-Economic Accounts (SEEA) has also recently been revised. These efforts all support the development of alternative measures and improved data on critical dimensions of both human well-being and better accounting for the sustainability of the earth’s natural resource base, ecological sys-tems and biological diversity.

A common recommendation from EU work and OECD-led work, and from the Stiglitz-Sen-Fitoussi commission, is that there is a need for a range of measures and indicators: No single index or indicator can reply to very different needs and purposes.

In the Nordic countries, Denmark, Finland, Iceland, Norway and Swe-den, we have seen the need for an updated overview of how different types of environmental indicators and accounting systems can best be applied to such diverse uses and purposes. The Working Group on Envi-ronment and Economics (MEG) under the Nordic Council of Ministers commissioned the national statistical agencies in the Nordic countries, led by Statistics Norway and Statistics Sweden, to prepare a report on these questions, and to discuss and recommend how the Nordic countries could contribute to developing such indicators and accounts further.

Some important and particularly interesting conclusions and recom-mendations in the report include:

 Indicators need to be used appropriately. For example, indicators which are best used for awareness-raising cannot be appropriately used for monitoring policies

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 Statistics used for monitoring need to be constructed specifically to address and keep track of policy goals

 Complex, aggregated indicators are typically only appropriate for awareness-raising, and data quality and international comparability are often questionable

 Attempts to develop “Green GDP” figures encounter a range of problems, above all that all valuation methods proposed for assigning prices to environmental goods and services yield prices that are not consistent with and cannot be added to the market-based prices in the present system of national accounts

 These problems also arise for attempts to integrate the value of ecosystem services in national accounting. While much useful work has been done and can be further developed on identifying and describing physical ecosystem services, in measuring the amounts and the importance of such services to human users and

stakeholders, and in analysis and evaluation of the different types of “value” of these services, the fundamental problem of incompatible types of prices remains a stumbling block to full integration in national accounting

 The statistical offices of the Nordic countries have a long history of working with “satellite accounts” for the environment, in combining national accounts with environmental information (e.g. the NAMEA system, National Accounting Matrix including Environmental

Accounts), and in modelling and analysis of a range of environmental issues, based on linking such national accounting and environmental data. These systems and methods may be the best approach to respond to the needs and demands of policy-making that “Green GDP”-efforts are sometimes put forward as an answer to

 On proposed new modules in the European Union legal framework on environmental-economic accounts, the report supports a module on energy use by economic actor, with some modifications, sees the detail required for a module on Environmental Goods and Services as a determining factor in its acceptance, and suggests that data needs for a new module on environmental protection expenditure could be met by current required reporting

 In relation to further development of existing modules, the report strongly recommends that priority on material flow accounting move from overall economy-wide figures to substances with less mass but higher environmental impacts, such as hazardous chemicals

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Using the right environmental indicators 9

These conclusions and recommendations might form part of the basis for Nordic contributions to further work in the OECD (e.g green growth indicators) and in EU/Eurostat (indicators for resource efficiency, envi-ronmental-economic accounts).

The report has been written by Julie Hass of Statistics Norway and Viveka Palm of Statistics Sweden, with contributions and comments from the statistical agencies in all five Nordic countries, and has also received valuable input from members of the MEG on draft versions.

Halldór Ásgrímsson

Secretary General

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Summary

The production of environmental information is often the responsibility of various ministries, agencies and institutions. Putting different parts of environmental information together to make a coherent picture can be a complex task. Making sense out of this variety of information and know-ing which indicators are developed is also challengknow-ing.

The main focus of this report is on indicators related to the environ-ment and some sustainable developenviron-ment indicators since these indica-tors include an environmental perspective. This report does not attempt to be exhaustive but tries to include many of the most commonly en-countered indicators by environmental policy makers. In addition to describing the different types of indicators, some evaluation and guid-ance regarding the use of indicators is given.

This report has two major parts. The first part of this report attempts to evaluate different types of information/indicators and their major uses. The second half looks at the work of the Nordic countries in light of the System of Environmental-Economic Accounting (SEEA), the related 2011 EU regulation requiring reporting of environmental accounts and the proposed new reporting areas that are under discussion with the European Commission (Eurostat).

In Part 1, it is noted that different types of information and indicators are needed for tracking progress, raising awareness and for analysis. Policy-makers need to have a variety of tools available in their toolboxes. The right tool needs to be used for the right purpose. In the same manner, indicators need to be used appropriately. Indicators which are best used for aware-ness-raising cannot be appropriately used for monitoring policies.

Indicators that can be used for monitoring policies or goals need to be constructed to specifically address and keep track of that policy or goal. Typically these types of indicators track a single area and can often be rather simple in their presentation, although not always so simple in their interpretation. Complex, aggregated indicators, which typically put a variety of different things together into a single indicator, are typically only appropriate for awareness-raising. Often, the amount of data need-ed for constructing these types of indicators is substantial and can be of questionable quality if the data is being developed for all countries. Typ-ically the quality of the data means that only very rough groupings of

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countries should be made and any type of ranking of individual coun-tries can be of questionable quality. Statisticians can often provide ad-vice and insights in the development and evaluation of indicators.

Part 2 focuses on the environmental accounts work in the Nordic countries. The well established statistical systems in the Nordic coun-tries is a resource especially when it comes to data availability, estab-lishing new data from existing information systems including adminis-trative records and in using the data for analysis purposes. The new EU regulation 691/2011 will provide country data from European countries that can be used for comparison and analysis.

The Nordic countries have been active in the development of environ-mental accounts. They have contributed in a variety of ways, but the Nor-dic countries have been particularly good at experimenting and trying to figure out how different types of accounts could be developed. This work has been particularly helpful to the wider statistical community.

The European Regulation (691/2011) will provide the structure and impetus to establish the three environmental accounts modules, air emissions, environmentally-related taxes and material flows as official statistics. This process will most likely contribute to improving the qual-ity of these statistics.

As additional modules are considered, the issues of quality and cost need to be seriously evaluated with respect to the type of information that is being developed. The methodology for data collection and the approach to developing the accounts needs to have a focus as well. Iden-tifying the types of policy questions that need to be answered are also important since these new modules need to be fit for purpose.

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Introduction

The production of environmental information in countries is often a puzzle with many different pieces found in various Ministries, agencies and institutions involved in the development and publication of data, statistics and indicators. Making sense of this information and keeping track of who is doing what can be a complex task. Figuring out what information is needed and when to use which type of indicator can also be a challenge. The main focus of this report is on indicators related to the environment and some sustainable development indicators since these indicators include an environmental perspective. This report does not attempt to be exhaustive but tries to include many of the most com-monly encountered indicators by environmental policy makers. In addi-tion to describing the different types of indicators, some evaluaaddi-tion and guidance regarding the use of indicators will be given.

This report has two major parts. The first part of this report attempts to evaluate different types of information/indicators and what are their major uses. The second half looks at the work of the Nordic countries in light of the System of Environmental-Economic Accounting (SEEA), the related 2011 EU regulation requiring reporting of environmental ac-counts and the proposed new reporting areas that are under discussion with the European Commission (Eurostat).

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In Part 1, an evaluation of existing types of statistics and indicators related to the environmental dimension of sustainable development will be made. The goal is to develop an overview of the types of indicators that are appropriate for certain types of analyses or uses and a general explanation over what they cannot be used for. Some reflections on the path that has been taken to today’s situation and some suggestions for the future will be developed. With the upcoming Rio+20 summit meeting in the summer 2012, new indicator initiatives may be proposed and knowing how to evaluate these proposals could be of help to policy makers. In Part 2, a description of what is currently being published and developed by the Nordic statistical institutes regarding environmental accounts is presented and a discussion of the new modules Eurostat is proposing for inclusion in the environmental accounts statistics regula-tion. Common Nordic positions will be identified and differences will be described. As part of this evaluation, the types of information and indica-tors arising from the proposed modules will be identified and as well as the policy usefulness of these new modules.

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Part 1.

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1. Major policy initiatives and

resultant indicator sets

There are such a large number and variety of policy initiatives at region-al, nationregion-al, multi-national and international levels that it is not possible to make a definitive list. When some of the larger international environ-mental and sustainable development related initiatives are examined, there seems to be roughly a ten year cycle for policy initiatives and their related metrics. The impetus seems to begin with the United Nations Conference on Environment and Development (informal name: Earth Summit) held in 1992 in Rio, continues with the follow-up conferences Rio+10 held in Johannesburg in 2002, and the upcoming Rio+20 to be held in Rio in summer 2012.

At the 1992 Rio Earth Summit there was a call for countries to devel-op indicators for sustainable develdevel-opment (SDIs). This call led to a large number of sustainable development indicator initiatives at all levels of government – Agenda 21 initiatives at the local level and SDI Task Forc-es and committeForc-es at regional, national and multinational levels. At the World Summit on Sustainable Development in Johannesburg in 2002, countries and multi-national organisations presented their sustainable development indicator sets (Hass, Brunvoll and Høie 2002).

At the European Union level, in addition to the Sustainable Develop-ment Strategy, the European Council at its meeting in Lisbon in 2000 resolved to make the European Union the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion. The ac-tion plan that resulted from this decision was known as the Lisbon Strategy (also called the Lisbon Agenda or Lisbon Process). An indicator set for monitoring this strategy was established and a large set of sus-tainable development indicators (SDIs) were established via a Task Force led by Eurostat.

When the Lisbon Strategy time period ended in 2010, it was replaced by Europe 2020, a 10-year strategy proposed by the European Commis-sion in March 2010 for reviving the European economy. The strategy aims at smart, sustainable, inclusive growth with greater coordination of national and European policy. Specific targets for employment rates,

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R&D investment, reducing greenhouse gas emissions, energy consump-tion, energy efficiency, early school leavers and numbers of persons liv-ing below national poverty lines were established and specific indicators for monitoring progress were also identified. Again an indicator set was established in the statistical system (http://epp.eurostat.ec.europa.eu/ portal/page/portal/europe_2020_indicators/headline_indicators).

The statistical systems have typically been heavily involved in the identification, establishment, monitoring and publishing of these differ-ent indicator sets. The SDI, Lisbon and Europe 2020 indicator sets con-sist of a large number of indicators from which it can be difficult to dis-cern a consistent message. One way of aiding in the communication of these indicators is through the use of symbols (such as “smileys”, traffic lights, or weather symbols). These indicator systems typically aim at being comprehensive but often this has not contributed to clarity but rather to confusion due to the size and complexity of the indicator sys-tems. It is difficult to understand the messages about sustainability that are obtained from a long list of indicators.

One reaction or response to these sometimes large and complex measuring/indicator systems was the Beyond GDP initiative. The Be-yond GDP website states that, “the BeBe-yond GDP initiative is about devel-oping indicators that are as clear and appealing as GDP, but more inclu-sive of environmental and social aspects of progress. Economic indica-tors such as GDP were never designed to be comprehensive measures of prosperity and well-being. We need adequate indicators to address global challenges of the 21st_{century such as climate change, poverty,}

resource depletion, health and quality of life” (http://www.beyond-gdp.eu/background.html).

The International Commission on Measurement of Economic Perfor-mance and Social Progress (also known as the Stiglitz-Sen-Fitoussi Com-mission) also looked critically at the adequacy and relevance of current measures of economic performance (specifically GDP) as measures of societal well-being and as measures of economic, environmental and social sustainability. The aim of the Commission was to identify the lim-its of GDP as an indicator of economic performance and social progress, to consider additional information required for the production of a more relevant picture, to discuss how to present this information in the most appropriate way, and to check the feasibility of measurement tools pro-posed by the Commission (http://www.stiglitz-sen-fitoussi.fr/en/ index.htm).

The Beyond GDP initiative and the Stiglitz-Sen-Fitoussi Commission have spurred development in the statistical system but it is too early to

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conclude whether the recommendations will eventually lead to better information for policy makers.

Another approach to reducing the large, complex measur-ing/indicator systems has been the development of “dashboards” or composite indicators or indices. These types of indices are typically skewed in certain ways due to how the calculations are devised. Often those who have devised these indices are unaware of how these indices are influenced by the methods chosen to aggregate the data (OECD and European Commission (JRC) 2008).

After the economic crisis of 2007/2008 and leading up to the United Nations Conference on Sustainable Development (also called “Rio+20”) a number of “green” policy initiatives have appeared both nationally and internationally. A number of initiatives worth mentioning include the OECD’s Green Growth Strategy and the associated indicators to monitor progress (http://www.oecd.org/document/56/0,3746,en_2649_37465_ 48033720_1_1_1_37465,00.html), the European Commission’s (DG Envi-ronment) Roadmap for a Resource Efficient Europe (http://ec. europa.eu/resource-efficient-europe/), and the Nordic “Towards a Green Economy” initiative (http://www.norden.org/en/nordic-council-of-ministers/ministers-for-co-operation-mr-sam/sustainable-development/ the-united-nations-commission-on-sustainable-development-csd/ sustainable-development-up-close-the-nordic-events-at-csd-19/towards-a-green-economy).

These are all policy initiatives that will need metrics for measuring progress. Some indicators have been established, such as those of the OECD Green Growth Strategy and for Europe 2020, but other policies do not have well defined goals that can be easily measured.

There seems to be a tension between defining policy and finding ways to measure or evaluate the effectiveness of the policy and its im-plementation. Finding a good match between policy and ways to meas-ure the progress related to that policy is not easy. And before we look more closely at different types of indicators and metrics we need to re-mind ourselves that the re-mind-set or narrative that is assumed here is that policy is fact-based and that progress of a specific policy is some-thing that can be measured. This may or may not be the case in actual fact but this is the modus operandi that is assumed in this analysis.

Sometimes environmental policy makers yearn for just one number, like GDP, which is readily available at only a 3 month time-lag. Having to manage and understand a multifaceted area such as the environment, which does not lead easily to the development of a single indicator that can be used for management purposes, makes the management and

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policy making more complex. Having to interpret a large set of indicators is very challenging and often overwhelming since it is difficult to even figure out where to start, much less know what to do with all of the in-formation in order to figure out the story line.

Given that users are often confronted by a large variety of different types of information, the next section of this report will look at different types of indicators/information that is found in the field of the environ-ment. We will try to make some sense out of this variety of information and attempt to make some general comments regarding appropriate uses and typical abuses when using different types of indica-tors/data/information.

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2. Different types of indicators

often used in relation to the

environment

When evaluating appropriate indicators, it can be helpful to figure out what perspective is represented in the policy and in the metric being considered. Often it is helpful to have a match between these two. One useful categorization is the Driving forces – Pressure – State – Impacts – Response (DPSIR) model (see Figure 9). Figuring out the different as-pects of a policy in these terms can often help lead to the matching or development of appropriate types of metrics for measuring progress.

For example if a policy is directed at maintaining the state of some area, such as there will not be a loss of biodiversity in a certain area, then appropriate metrics would perhaps describe the current situation (state) and then could also consider tracking factors that might be the biggest threats or pressures. At a later time the situation or state would need to be re-evaluated and a measurement of change could then be devised. In this way a type of measuring system could be developed. Matching the policy focus and the ways of tracking progress – with exist-ing information/indicators or by developexist-ing new information sets – can lead to sensible monitoring systems.

Another approach is often to identify different existing information or indicators and to figure out what these can be used for – sometimes this can lead to inappropriate uses of these indicators. One should be careful when taking information developed for one purpose and using it in another context or for another purpose. Using information that is fit for purpose is the best.

There are many different sets of data, indicators and information and taking a look at different groups of these indicators can be helpful when encountering different indicators and information in the course of policy making and monitoring.

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2.1 Indicator/information types

There are many different ways to group and discuss sets of information or indicators. The following discussion tries to provide some useful in-sights and is not meant as a definitive classification or exhaustive list of indicators but most types or approaches have tried to be included in the discussion.

Many of the statistics and resultant indicators developed from envi-ronmental statistics and accounts have been pressure indicators from a production perspective. Examples of these are different types of emis-sions to air or to water or amounts of different types of waste by indus-try. This type of information has helped to identify, for example, which industries or specific plants in a country are contributing to a problem and to monitor progress of these industries or plants. Sector or industry-based policy has needed this type of production perspective information. Examples of these types of data would be solid waste and emissions to air and water from the industries that are releasing these different types of pollution.

With a production perspective, the focus has typically been on what has been produced and are assigned to those producing the products. But this can also look at what goes into a production system using an efficiency or productivity view. Measuring or monitoring from this per-spective needs efficiency or productivity measures which often mean that two different types of data need to be combined to make ratio indi-cators (typically environmental and economic or physical production data are combined).

But as the focus in environmental policy making changes from a pro-duction to a consumption perspective and from a primarily national production focus to a global production focus then more consumption-based information is needed. In this case, the demand for information including embedded emissions or embedded carbon increases. If a con-sumption perspective is taken, then for example the emissions related to oil extraction are not assigned to the country extracting the oil but to the country which uses the oil – in intermediate or final consumption.

These types of production, consumption and efficiency/productivity metrics are measuring flows. Another way of looking at developments is to measure the status or state of different assets between two or more points in time and identify/describe differences. The Nature Index in Norway is one example of a status or state indicator (see Figures 4 and 5).

Sometimes an indicator is constructed by taking flows and converting them into stocks or area – for example the Ecological Footprint takes

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consumption and converts it into land area. Any time there is some type of conversion from one type of information into another (flows into area, physical units into monetary units, physical units into “impacts”, etc.) the process of conversion typically adds another layer of uncertainty and approximation into the calculations. This increases the uncertainty of the figures and typically reduces the precision of using these indicators for monitoring purposes.

Including aspects beyond the physical environment, as is the case with sustainable development for example, means that information about economic and social topics are also included in the data set or composite indicator. These additional dimensions add another level of complexity to the indicator and to the use and interpretation of these types of indicators.

Combining things that are measured in different units also requires some type of scaling, normalization or conversion into units that can be appropriately combined.

The common elements in producing an aggregated type of index or indicator involve a number of steps. This process has been described as including four steps (OECD 2002b), the selection of variables, transfor-mation into the same dimension, weighting the constituent variables before combining them and the evaluation of the index scores (“good”, “poor”, or in relation to a goal).

The development of indices is actually a rather complex process. The Econometrics and Applied Statistics Unit at the Joint Research Center (JRC) of the European Commission have evaluated many of the most popular composite indices and have identified serious flaws inherent in their construction. Since there are so many technically incorrect aggre-gation methodologies used in these popular indicators, the JRC and the OECD have developed a manual describing a 10 step process for con-structing composite indicators (OECD 2008), see table 1 below.

If these steps are followed during the construction of a composite indi-cator/index, then the most common construction pit falls can be avoided.

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Table 1. 10 Steps for Constructing Composite Indicators

Step Why it is needed

Developing a theoretical framework

Establish a clear understanding of the multidimensional phenomenon to be measured. Structure various sub-groups of the phenomenon if needed.

Selecting variables Need to be relevant to phenomenon of interest, data availability and quality.

Imputation of missing data A complete data set is needed – so this step gap-fills available data sets. Multivariate analysis Check the underlying structure of the data (principal components

analysis, cluster analysis) to identify groupings in the data. Compare the statistically-determined structure inherent in the data with the theoretical framework. Identify and discuss differences. Normalisation of data Variables need to be made comparable.

Weighting and aggregation Weighting and aggregation procedures should be done in accordance with the theoretical framework. Determine whether correlation issues among indicators should be accounted for. Discuss whether compen-sability among indicators should be allowed.

Robustness and sensitivity Conduct sensitivity analysis of the assumptions (inference) and deter-mine what sources of uncertainty are more influential in the scores and/or ranks of the composite indicator results.

Back to the details Try to identify the main drivers of the movement of the indicator. Identify if the results are overly dominated by a few of the component parts of the index.

Links to other variables Develop data-driven narratives based on the results.

Presentation and dissemination Present the composite indicator results in a clear and accurate man-ner. Develop a coherent set of presentational tools and select the visualization technique which communicates the most information. Source: (OECD 2008, table adapted from Table 1, 20-21)

There are a variety of different approaches that can be taken when mak-ing groupmak-ings of indicators. The categories of sustainable development (economic, social and environmental) was used in the Naturvårdsverket report (2011) and the OECD (2002b) report uses the following 4 groups: (1) Indices solely based on natural sciences; (2) Policy performance indices; (3) Indices based on an accounting framework; (4) Synoptic (aggregated) indices.

In this report a number of different types of information/indicator types are presented which are grouped according to their main uses or relevance to policy. Please note that the main focus is on indicators re-lated to the environment and some sustainable development indicators since these indicators include an environmental perspective and not on all possible types of indicators. This list does not attempt to be exhaus-tive but tries to include many of the most commonly encountered indica-tors by environmental policy makers (see Table 2).

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Using the right environmental indicators 25 Table 2. Indicators and their major uses / policy applications

Major uses/ Policy Applications

Information Type Indicator/Information description or example

Monitoring progress or goals

“Simple” / one component indica-tors

Physical emissions (to air, to water, to land), waste amounts (production perspec-tive)

Energy, water use (use or “consumption” perspective)

Ratio Productivity / Efficiency / Intensity

- Ratio calculation (Tonnes steel pro-duced/CO2 emissions; CO2 emis-sions/production value) Comparison /

Decoupling

- Components are shown separately (emissions and production value) - Shows if two components moving to-gether or in separate directions Awareness raising for

Environment

Environmental Indices Ecological Footprint2

Specific types of so-called “footprints” - Carbon/carbon emissions “footprint” - Water “footprint”

(These are typically expressed in mass or volume units rather than area units so are technically not really “footprints” which imply area)

EMC (Environmentally-weighted Material Consumption2)

DMC (Domestic Material Consumption) HANPP2 (Human Appropriation of Net Primary Production)

NI – Nature Index (Norway, NL and under development in Australia)

Adjusting the national accounts (flows and assets)

Monetarised Flow accounts Depletion adjusted national accounts aggregates (SEEA)

Production Account: - Depletion adjusted GDP - Depletion adjusted Value added Distribution and Use Accounts: - Depletion adjusted Operating surplus - Depletion adjusted saving

Green/Environmentally adjusted Net National Product (Green NNP) Measure of Economic Welfare (MEW) 1 Monetarised Asset Accounts Genuine savings (GS)

National wealth Awareness raising – about

social, economic and environmental topics, sustainable development. Often used to “rank” countries

Composite indicators including more than an environmental dimension

Genuine Progress Indicator (GPI) 1 Human Development Index (HDI) 1 Happy Planet Index (HPI)1

Index of Sustainable Economic Welfare (ISEW) 1

Sustainable Net Benefit Index (SNBI) 1 Weighted Index of Social Progress (WISP) 1 Sustainable Society Index (SSI) 3 FEEM Sustainability Index (FEEM SI) 4

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Information Type Indicator/Information description or example

Analysis Decomposition Can quantify some of the factors that are

influencing the changes in the data – typically including structure of the econo-my and factor inputs (such as energy/fuel types, industries (NACE/ISIC), economic growth)

Environmentally Extended Modeling – includes environmental variables

Input-Output Based on the Leontif I-O methodology used with national accounts. General Equilibrium and other types of econometric models Used for scenario building and prediction of future trends Budgetary modeling – income and trans-fers Including environmentally related transactions (taxes/subsidies) For more detailed descriptions of these indicators please see:

1

Indikatorer för Välfärd och Hållbar Utveckling: En översikt (2011). Naturvårdsverket Rapport 6453.

2

Potential of the Ecological Footprint for monitoring environmental impacts from natural resource use: Analysis of the potential of the Ecological Footprint and related assessment tools for use in the EU’s Thematic Strategy on the Sustainable Use of Natural Resources. (2008). Report to the Europe-an Commission, DG Environment.

3

NI = Nature Index. Norwegian Directorate for Nature Management (2011). The Norwegian Nature Index 2010. DN-Report 1-2011.

4

SSI = Sustainable Society Index (http://www.ssfindex.com/ssi/)

5

FEEM SI = Fondazione Eni Enrico Mattei Sustainability Index (http://feemsi.org/)

Each of these groupings will now be described in more detail with a fo-cus on their strengths and weaknesses. Typical uses or misuses of the indicators will also be covered.

2.2 Monitoring Progress or evaluating developments

towards goals

Information Type Indicator/Information description or example

Monitoring progress or goals

“Simple” / one component indicators

Physical emissions (to air, to water, to land), Waste amounts (production perspective)

Energy, water use (use or “consumption” perspective)

When goals are specified in a policy, for example a certain amount of reduction (per cent or amount) within a certain time period or end point, often monitoring the progress towards achieving these goals is desirable. If the goal set is something that is already measured, then the statistical system or another monitoring system’s data can contribute fairly easily to this type of monitoring.

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One example of measuring towards targets are the Norwegian emis-sions of acidifying and polluting gases included in the Gothenburg Proto-col and the 2010 targets set in that ProtoProto-col. The following figure shows the Norwegian emissions to air with the 2010 target clearly identified on the right-hand side. Norway has met the targets for nitrogen oxides, sulfur dioxide and non-methane volatile organic compounds (NMVOC) but not for ammonia.

Figure 1. Emissions to of nitrogen oxides, sulfur dioxide, ammonia and NMVOC. 1990-2010. Norway. 1 000 tonnes. 2010 target, Gothenburg Protocol. Index 1990 = 100

Sourse: Emission inventory from Statistics Norway and the climate and Pollution Agency http://www.ssb.no/english/subjects/01/04/10/agassn_en/

Not infrequently, however, the goals being set by policy makers are not very easy to define what should be included or excluded, by which breakdowns or how changes should be measured. This type of situation often results in the use of proxies rather than indicators which directly measure progress towards a goal. Typically the industry breakdown or the types of emission or waste or the specific energy carrier (biofuels) are slightly different between the statistics and the policy.

For example, voluntary agreements for pollution reduction are some-times made between government authorities and industry

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organiza-tions. Monitoring this type of agreement using existing statistics can often be challenging since it is very seldom that the members of an in-dustry organization are the same as in the inin-dustry groups used in the statistical system (NACE/ISIC). Or perhaps an agreement regarding packaging waste has been made – but the waste categories are material-based (paper, metal, wood) and not use or purpose-material-based, i.e. used for packaging. These types of differences in definitions of the populations or categories make it difficult to sometimes use the existing statistics.

Evaluating whether the goal is being reached can also be challenging. Linear relationships seldom occur but are often assumed when making predictions in the future. These types of assumptions often have implicit increasing growth (or reduction) rates which become more unlikely with increasing time. Considering the annual (or periodic) growth or reduction rates needed to reach the goals may be a better way to under-stand the magnitude of change that is required. Often reducing rates of improvement can be encountered when incremental change is expected. Distance to target can also be measured in different ways and is not al-ways as simple as it seems.

These types of indicators clearly show the development over time and are generally sensitive to changes (if measured at an appropriate level of sensitivity). Typically the information can be expressed in a fair-ly simple, understandable and clear manner that even non-experts can readily understand. The difficulty with this type of indicator is trying to figure out what factors are influencing its development over time. Identi-fying these factors often require different types of analyses.

2.3 Ratio Relationships

Ratio Relationships – typically between two types of pressure often one economic and one environmental

Productivity / Efficiency / Intensity

- Ratio calculation (Tonnes steel produced/CO2 emissions; CO2 emissions/production value) Decoupling - components are shown separately (emissions and

production value)

- shows if two components moving together or in separate directions

Ratios of two variables are typically constructed when these two activi-ties are considered to be closely related. Depending on what is placed in the numerator and denominator, productivity, efficiency or intensity ratios can be developed. Producing more for less is a typical type of goal. Labor productivity, resource efficiency, pollution intensities are all ratio

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indicators. Whether the indicator should be increasing or decreasing depends on how the indicator is constructed; productivity and efficiency often should increase whereas intensities typically should decrease if an improvement is seen.

One problem with these types of ratio indicators is that one part of the ratio could be the dominant factor in changing the direction of the indicator. To show the trends in both of the components of the ratio, decoupling indicators (OECD 2002) can be developed where both the trend in the numerator and the denominator are shown separately from the ratio trend. Typically these indicators are shown indexed to the first year in the time series. With this type of depiction it can be fairly easy to see if one factor is influencing the trend in the ratio indicator more than the other. If decoupling is the goal, then the two factors being tracked should be going in separate directions and not moving together in the same direction.

Often the problem with ratio and decoupling types of indicators is that what is included in the numerator is different from what is included in the denominator. In other words, you have apples divided by oranges rather than apples divided by apples.

For example, greenhouse gas emissions (as defined by the Kyoto Pro-tocol) vs. GDP – here the emissions of international shipping (ocean transport) and international air transport are excluded from the GHG-emissions calculations but the economic activities of the shipping and airlines are included in the GDP. So here you have the case of apples and oranges.

When setting up ratio or decoupling/comparison type of indicators it is important to be sure that the system boundaries are the same regard-ing what is included and excluded in the numerator and denominator and that it makes sense to compare the two factors. These types of indi-cators, when so graphically placed together, strongly imply mutual casu-alty. If there is doubt whether these two things are linked, then it may be wiser to avoid constructing these types of combined indicators.

There can be many different types of comparison or decoupling indi-cators. Two which are relevant to the field of environment are called “resource decoupling” and “impact decoupling.” In the case of resource decoupling, economic activity is compared with the associated natural resource use. In the case of impact decoupling, environmental impacts are compared with economic growth. From the national accounts we have measurements for economic activity such as GDP. Measurements for resource use have also been developed but very often they do not encompass all of the resources needed for the economic activity. Even

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more problematic are measurements for identifying and measuring en-vironmental impacts.

The goal is often expressed as decoupling one activity from another. Sta-tistically we would describe this as various measures of correlation. Relative decoupling would exhibit weak correlation between variables and absolute decoupling would show negative correlation between variables.

In the following example, greenhouse gas emissions (in tonnes CO2 –

equivalents) from Norwegian industry are combined with their output in economic terms. Emissions from households are excluded since households are consumers and do not contribute in terms of industrial production. Emissions from international transportation (ocean and air transport) are included. In these ways the emissions inventory data used for reporting to the Kyoto Protocol are adjusted to the same system boundaries as the economic data used for comparison.

Figure 2. Total Greenhouse gas emissions (CO2 equivalents), output (constant

2005-prices) and emission intensity for Norwegian economic activity (excluding households, including international air and ocean transport). 1990-2010*. Index 1990 = 1.0

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2.4 Awareness-raising for the Environment:

Environmental composite indices

Awareness raising for Environment

Environmental Indices

Ecological Footprint2

Specific types of so-called ”footprints” - Carbon/carbon emissions ”footprint” - Water ”footprint”

(These are typically expressed in mass or volume units rather than area units so are technically not really “foot-prints” which imply area)

EMC (Environmentally-weighted Material Consumption2) DMC(Domestic Material Consumption)

HANPP2 _{(Human Appropriation of Net Primary Production)}

NI – Nature Index (Norway, NL and under development in Australia)

When wanting to increase awareness about the environment and how humans are impacting the environment, indicators that are both intui-tive and can make a visual impact are often very effecintui-tive communica-tion tools. By taking a consumpcommunica-tion focus rather than a produccommunica-tion focus, the indicators often become easier to understand for the general public. The attraction is that they include everything into just one number.

To make these types of indicators you have to add together many differ-ent things – and this is where the inherdiffer-ent complexity and uncertainty en-ter. In addition, when so many different things are combined, the indicator becomes insensitive to change. This also means that these overall composite indicators are not useful for monitoring goals or evaluating policies.

There are different approaches taken to this process of aggregation. The Ecological Footprint converts economic consumption and the re-sultant emissions into a measure of productive land, called a global hec-tare. The Ecological Footprint (EF) measures the extent to which human-ity is using nature’s resources relative to an estimated regeneration rate for nature. EFs are usually presented together with biocapacities (BCs) which measure the bioproductive supply. If an EF is larger than the available BC for a selected time period the EF/BC resource accounting results in a deficit or overshoot. Overshoot occurs in case of human re-source extraction and waste generation exceed an ecosystem’s ability to regenerate the extracted resources and to absorb the generated waste. Global overshoot (at the planet level) leads to a depletion of the earth’s life supporting natural capital and a build-up of waste.

This is done for each country and then the sum of all countries gives a measure of how many “earths” are needed for this type of consumption. By taking a consumption approach, rather than a production approach,

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this indicator feels very intuitive for many people. There are a number of inherent challenges with the Ecological Footprint – the largest is perhaps the conversion of consumption into a measurement of area. Defining the “global hectare” is not an easy task and providing the conversion factors for each product consumed in each of the different countries to this unit of measure is also an art and a science. The approaches used to present the Ecological Footprint typically embed a normative evaluation of fairness.

In addition, resources without a significant regenerative capacity do not fit in the concept of biologically productive area. For example, the biocapacity needed to sequester CO2 emissions is included but not the

regeneration of the “burnt” fuel stocks. Moreover, nature has no signifi-cant absorptive capacity for several important environmental problems: pollution from heavy metals, radioactive materials or persistent organic pollutants. This means that the reductions of these environmentally active substances which do not have a significant absorption or regener-ative capacity are not covered by the EF/BC accounts (Eurostat 2006).

Even with these significant shortcomings, the ecological footprint is a widely used indicator even though it can be misleading. The European statistical system has not endorsed its use in official statistics.

But the idea of the “footprint” is so appealing that two more limited “footprint”–like indicators have emerged; the carbon /carbon emissions footprint and the water footprint. In contrast to the Ecological Footprint, these other two “footprints” are typically expressed in mass or volume units rather than area units so are technically not really “footprints” which imply area. But all the “footprints” are consumption rather than production indicators.

The Carbon footprint calculation methodology is more highly devel-oped than for water. Carbon footprint can be calculated at any level – local, regional, or country – whereas the Water footprint is typically cal-culated at a local or only regional level but can be calcal-culated at the coun-try level. There can be rather high levels of uncertainties in the calcula-tions so that revisions in the factors used can have large consequences and influence the results. Also what is included in the calculations can be rather questionable. For example, how much of the evapotranspiration occurring in the land of origin for imported products can greatly influ-ence the water footprint of imported products.

The indicators, EMC (Environmentally-weighted Material Consump-tion) and DMC (Domestic Material ConsumpConsump-tion) are based on material flows in the economy. EMC uses LCA (life cycle analysis) data for creat-ing impact coefficients to develop an aggregated impact indicator. This indicator has been developed by researchers and is not easily replicable

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by others. DMC and DMCRME (Domestic Material Consumption in Raw

Material Equivalents) is being further developed by Eurostat and uses both LCA information as well as environmentally extended input-output modeling for developing coefficients for transforming imported prod-ucts (and exported prodprod-ucts) into raw material equivalents.

To determine the amount of material inputs needed for the economic activity of a country, the following calculation is made:

Extraction from the national environment =

+ Imported products converted into raw material equivalents - Exported products converted into raw material equivalents

By converting the imports and exports into their raw material equiva-lents, the calculation gives a fuller picture than the calculation of Domes-tic Material Consumption (DMC) which combines the national extraction of raw materials with products that are imported and exported.

In the case of DMC (domestic material consumption) as it is currently being reported, raw materials are combined with products. This means that there is an inherent asymmetry in this indicator when raw materi-als (minermateri-als, grazed biomass, harvested crops, etc) are combined with finished and semi-finished products. DMC already selectively leaves out oxygen and water but it is still dominated by relatively inert materials – biomass, sand and gravel – which make this a very questionable indica-tor. The following figure shows the domestic material used (domestic extraction + imports) by materials for EU27. Sixty-two percent of the total is biomass, sand and gravel.

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Figure 3. Domestic Extraction Used EU-27 (extraction + imports), 2007

Source: Eurostat (2010) (data: env_ac_mfa)

Combining these very different things does not really provide much use-ful information about the environment or the economy, especially as DMC is dominated by biomass, sand and gravel. It is also important to note that comparing DMC to economic variables, such as GDP, is inap-propriate since the system boundaries are different. Since water is ex-cluded in the physical flows covered by DMC this would mean that the economic activity related to water should also be excluded – such as electricity generation from hydropower plants, drinking water, etc. – which is not possible. When making indicators that combine two differ-ent units (such as mass and production value) the system boundaries – i.e. what is included in the different systems – need to be the same.

The OECD has developed a database for material flow accounts for its member countries which exclude not only oxygen and water but also sand and gravel. By also excluding sand and gravel, which are a major portion of the material flows in most countries, allows for other material flows which have potentially greater environmental impacts to be iden-tified in the data sets. This approach does not however address the prob-lem of the asymmetry between extracted raw materials and finished and semi-finished products when added together.

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In addition, the data used for imports and exports is typically from trade statistics. The trade in certain large items, such as ships and oil platforms, are only given in non-mass units. Converting either volume or number of units to mass can only be done with conversion factors which have a high level of uncertainty. This brings even more uncertainty into the figures. For these reasons, DMC can not be used for monitoring or goal-setting purposes.

Human Appropriation of Net Primary Production (HANPP) is a measure of human use of ecosystems and can be defined as the amount of terrestrial net primary production required to derive food and fibre products consumed by humans, including the organic matter that is lost during the harvesting and processing of whole plants into end products (Best, et al. 2008). HANPP identifies the intensity with which humans use land areas and is related to landscape structure and diversity. Ac-cording to Haberl (1997, Haberl, et al. 2007) HANPP refers to areas of land and not to the biomass consumed by the defined population and is considered as a measure of the physical size of an economy relative to the ecosystem in which it is embedded.

Typically HANPP is shown using color coding in maps (see for exam-ple: http://sedac.ciesin.columbia.edu/es/hanpp.html). Again, there is the challenge of changing consumption into measures of area, the same challenge encountered with the Ecological Footprint. High levels of HANPP are found primarily in urban areas and this pattern is easily seen in maps typically used to illustrate HANPP.

These indicators are typically easier for individuals to relate to since their focus is consumption and the visual representation of the indica-tors can be appealing and easy to communicate. But these indicaindica-tors combine so many different things through the use of conversion coeffi-cients which are not that well grounded or tested. For these reasons these indicators cannot be used to monitor specific goals but are useful as awareness raising information at a macro-level. These indicators are not developed or published by the statistical system and are usually the products of research institutes or consultancy projects.

A different type of environmental composite indicator is the newly de-veloped Norwegian Nature Index (Nybo, et al. 2011). This indicator is markedly different from the other composite indicators for the environ-ment since it evaluates the current state of an area with respect to a defined reference state. The reference state is not defined as a pristine ecosystem but rather as an ecologically sustainable state. A scaling methodology was used to facilitate the combining of various indicators. It is not essential that the reference value be completely correct as long as it is set at a level that

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would describe a very good state of the indicator. The advantage of using reference values is that these enable evaluations between different ecosys-tems, allows for measurement over time and facilitates aggregation across a variety of dimensions. The methodology for the Norwegian Nature Index is described in more detail by Certain, et al. (2011) (http://www.plosone.org /article/info%3Adoi%2F10.1371%2Fjournal.pone.0018930).

The following nine major ecosystems are evaluated in Norway’s Na-ture Index:

(1) seabed; (2) open sea – pelagic; (3) coastal waters – benthic (bot-tom dwelling species); (4) coastal waters – pelagic; (5) fresh water; (6) open lowland; (7) forest; (8) mire–wetlands; (9) mountain.

Figure 4 Trends in Nature Index values per major ecosystem, averaged over the whole of Norway

Source: Norwegian Institute for Nature Research, Nybo, Certain and Skarpaas (2011) (http://www.dirnat.no/content/500042044/The-Norwegian-Nature-Index-2010)

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Figure 5. Nature Index values for each major Norwegian habitat in 2010

Source: Norwegian Institute for Nature Research, Nybo, Certain and Skarpaas (2011) (http://www.dirnat.no/content/500042044/The-Norwegian-Nature-Index-2010)

The Nature Index is a compilation of the knowledge of the experts and an evaluation of the state of biodiversity and its vitality. The Nature Index is first and foremost a measure of the state and development of biological diversity on an overall level (Nybo et al.2011). The Nature Index is devel-oped at the national level or for different areas of the country and for differ-ent ecosystems. Figures 4 and 5 presdiffer-ent the developmdiffer-ents in each of the ecosystems between 1990 and 2010 in the first figure and the state of the different ecosystems in 2010 for different areas (municipalities) in Norway.

The development of the Nature Index has helped to bring the scattered information about biodiversity together in a coherent way. There are a number of areas that need improvement but the value of bringing together such divergent sources of information and expertise into creating a whole picture of the Norwegian biodiversity should not be underestimated.

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In the long run, the Nature Index is wanted to be used for monitoring purposes. Since it is possible to systematically disaggregate the data it may be possible that the data used to create the Nature Index can also be used for monitoring purposes. The Index at the national level, however, is mostly useful for awareness raising purposes.

2.5 Adjusting the national accounts – flows and assets

Adjusting the national accounts (flows and assets)

National income measures adjusted for natural re-source depletion and degradation

Depletion adjusted national accounts aggregates Production Account:

- Depletion adjusted GDP - Depletion adjusted Value added Distribution and Use Accounts: - Depletion adjusted Operating surplus - Depletion adjusted saving

Green/Environmentally adjusted Net National Prod-uct (Green NNP)

Measure of Economic Welfare (MEW) Asset Accounts – valuing

the net change in a range of assets (including human and environmental capital)

Genuine savings (GS)

National wealth / The Wealth of Nations

In the System of National Accounts (SNA) there are two types of ac-counts. The flow accounts follow different transactions in the economy over a certain time period. The asset accounts, which are estimates of stocks, have an opening value at the beginning of the time period and a closing balance at the end of the time period and describe the changes between these two valuations.

Monetarised flow accounts include the depletion adjusted national ac-counts aggregates as described in the newly revised SEEA manual (System of Environmental-Economic Accounting) and indicators such as Green Net National Product (Green NNP) and Measure of Economic Welfare (MEW). These indicators adjust the existing SNA aggregates with estimates for natu-ral resource depletion (SEEA), environmental degradation (included in Green NNP) and consumption of non-market goods and services (MEW).

When using the national accounts as the frame of reference, the valua-tion techniques applied need to be of the same character as those found in the national accounts (as defined in SNA-2008). This means that only assets that are recognized by the national accounts and have market prices can be included and only monetary flows that have transactions can be included.

Other methods for valuation (http://www.communities.gov.uk/ documents/corporate/pdf/146871.pdf), such as willingness to pay, stated

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preference (Contingent valuation or choice modeling), revealed preference (choice models, travel cost, Hedonic pricing, averting behavior) or benefits transfer are not considered consistent with the valuations used in the na-tional accounts. The nana-tional accounts require substantive additivity which means that the methods of valuation are economically uniform for all types of assets. Valuation at current market prices, or the nearest feasible approx-imation to them, is the only method that meets the requirements for both formal and substantive additivity. This is one of the main problems with combining the national accounts with other types of non-market valuations. The System of Environmental-Economic Accounting (SEEA-2012 UNSC draft) provides information for the calculation of depletion of national resources for which market prices can be determined. These include re-sources such as minerals, crude oil and natural gas, timber, land and fish.

It is thought that by including depletion in the calculations of the main national accounts aggregates, the using up (technically called “de-pletion”) of natural resources could be more appropriately included in the national accounts than is currently recommended in the SNA-2008.

In the SEEA (2012 White Cover draft) the following national accounts aggregates are adjusted for depletion:

 Production Account:

a) Depletion adjusted GDP

b) Depletion adjusted Value added

 Distribution and Use Accounts:

a) Depletion adjusted Operating surplus b) Depletion adjusted saving

Calculations for depletion should use the Net Present Value (NPV) ap-proach. Assumptions regarding future prices, extraction rates and costs, and discount rates are also necessary for these calculations. Other ap-proaches to depletion valuation such as net price method or El Serafy method (also called the user cost method) are not endorsed in the re-vised SEEA (2012-draft). Valuing degradation is also not currently in-cluded as part of the revised SEEA (2012-draft). Therefore only deple-tion adjustments can be made to the nadeple-tional account aggregates.

Green/Environmentally adjusted Net National Product (Green NNP) requires that both natural resource depletion and environmental degra-dation be valued and included with the standard national accounts to adjust these accounts for the using up (depletion) of natural resources and damage (degradation) to the environment. Although this is

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pro-posed by economists, this approach is not acceptable under the guide-lines established for the System of National Accounts (SNA).

These types of depletion and degradation adjustments require exten-sive information about the natural resources being used in the economy and about the condition of the environment. Information about the state of the natural resources/environment at the beginning of the time peri-od and at the end of the time periperi-od – identifying the changes and then valuing these changes is needed.

Typically this type of information used for asset accounting is not available at the time intervals or frequencies needed. In addition and more importantly, the valuation methodologies used for environmental degradation are not compatible with the market values used in the na-tional accounts. Although the units of measurement are both monetary, the types of values that are represented in the national accounts (mar-ket) are totally different from the degradation valuations and technically speaking should not be combined.

Other issues such as the large uncertainty and the high levels of vari-ation in the asset accounts for some natural resources – such as oil and natural gas due to annual reappraisals of the reserves – means that these factors will obscure other more subtle changes which will make the fig-ures less useful for management purposes. In addition, which natural resources that are included can depend on whether only those with market prices (timber, fish, oil, natural gas, different minerals) are in-cluded or whether there is an attempt to include other resources (for example, non-timber resources from forests) or entire ecosystems (such as “a well functioning climate” or “biodiversity”). The scope of what is included in the calculations can vary.

In addition to the scope (what is included and excluded) and the technical issues of implementation (especially valuation), changing very well known economic indicators (i.e., GDP or GNP) by making unconven-tional adjustments can lead to confusion. On the other hand, for coun-tries where natural resource extraction plays an important role in the economy, good information about the stocks and flows of these re-sources in physical terms is important for their management.

Genuine Savings

In standard national accounting, only the formation of fixed, produced capital is counted as investments. Likewise, in the standard calculation of net saving rates only depreciation in the value of human-made capital is included as a decrease in the value of a nation’s assets. In the World Bank’s adjusted net savings framework (also called “genuine savings”) a broader view of natural and human capital are taken.